Tata targets Tetley expansion

IS TEA the new coffee? Ask India's venerable Tata family, the relatively new owners of London-based Tetley Group, and the answer is an unequivocal 'Yes'.

Ratan Tata, the soon-to-retire scion of the family's majestic empire, wants the British to regard a cup of Tetley how they might a visit to Starbucks or any one of the myriad coffee chains that have sprung up. 'I can see us taking Tetley to the more value-added, consumer end of the market,' the reclusive Tata told the London Evening Standard's Business Day. 'We think it's a vastly underdone market.'

Delve into Tata's purchase of Tetley, a company second only to Unilever's Lipton in global penetration, and you can see where his plans come from. Already one of India's biggest tea producers, with vast estates in India's north-eastern Assam state, Tata paid £271m for Tetley two years ago to become the world's second-biggest tea producer and marketer.

Tata had been stalking Tetley for some time, trying and failing to buy it in 1995 when it was taken out by London venture capitalists - Prudential-backed PPM Ventures and Schroder Ventures. The two financiers put Tetley back on the block in 1999, prompting a virtual auction between Switzerland's Nestle, Sara Lee of the US and the Tatas. The latter emerged victorious in what is still India's biggest overseas purchase - the mother of all deals, the domestic Press said.

Now in the Tata fold, the family is working to make Tetley pay, trying to integrate their creaking estates with Tetley's marketing savvy. Tata has abandoned Tetley's 'Tea Folk' - Sydney, Gaffer and the rest - and has spent £20m on a campaign to modernise the brand in Britain.

But Tetley and Britain means more than tea to the Tatas. The deal will be the driver of the family's bid to expand its moribund empire beyond India. Although it has been overtaken in recent years by the thrusting Ambani family's Reliance Industries as India's biggest corporate empire, Tata still controls a sprawling domain, albeit a sclerotic one that is not moving as fast as India. The family has more than 100 operating companies - 30 of them listed - and will this year command sales of £8bn in sectors as diverse as software, hotels, telecoms, steel, power and trucks.

But margins are thin. Anchored by a £400m greenfields expansion into passenger cars, the Tata group returns profits of around £200m. Now Ratan Tata wants to take the company global and Britain seems to be the main theatre of expansion. Beyond Tetley, Tata's Taj Hotels has two properties in central London - 51 Buckingham Gate and the Crowne Plaza Hotel at St James.

And there are plans to export Tata Engineering's new passenger car, the Indica, to Britain in a joint venture with Rover. He said the Indica will be priced at the lower end of the market suggesting that, just as tea might be the new coffee, a modest little Indian sedan might become the new Lada.